AUTO INSURANCE: MYTHS, FACTS AND YOU

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1 AUTO INSURANCE: MYTHS, FACTS AND YOU

2 Auto Insurance: Myths, Facts and You Copyright 2015 More Than Wheels Eagle Court, Keene, NH

3 Contents Welcome From Terri Steingrebe 4 Myths and Truths About Car Insurance 5 How to Save Money on Car Insurance 7 Facts About Hard To Insure Situations 9 Car Insurance and Auto Financing 11 Car Insurance Companies 13 Other Resources 15 3

4 Welcome Dear Friends, We hope you will enjoy our free ebook: Auto Insurance: Myths, Facts and You. We are committed to helping you get the best information about buying, keeping, and using a car for your financial independence. Transportation is your key to freedom, and insurance is your responsibility as a car owner. But car insurance is more complicated than ever before. Understanding the ins-and-outs, ways that insurance will benefit you, and pitfalls and hidden costs to avoid, are some of your keys to success. We ve collected the most current information about car insurance in this handy ebook. I hope you enjoy reading it! Thank you for helping us help you drive forward... Terri Steingrebe, CEO 4

5 Myths and Truths About Car Insurance According to Consumer Reports, which completed a two-year research project covering more than 2 billion car insurance price quotes in 2015, what you don't know about car insurance could hurt you. The Biggest Myth: Premiums Are Based On Your Driving Record One of the many myths about car insurance that Consumer Reports uncovered was the commonly-held belief that your driving record is the biggest influence on premiums. Most people, when asked, would say a Driving While Under the Influence (DUI) conviction would lead to much higher insurance premiums. While your premiums will certainly rise if you are convicted of a DUI, Consumer Reports found out that they'll rise higher if you have poor credit. Only three states: California, Hawaii, and Massachusetts, ban this practice. After the 2008 recession, 29 states passed regulations that allowed consumers to request that their rates not be based on their credit scores if they had extenuating circumstances, like job loss or a forced relocation. The problem? The information was not publicized so few policy holders are aware of it. Truth: Price Optimization It isn't legal in seven states, including Vermont, but "price optimization," a tactic where insurance companies base your premium quotes on how high a price you are likely to tolerate can lead to hundreds of dollars in extra premiums. Insurance "price optimization" considers such factors as your shopping habits for big ticket items like cell phones and daily items like beer or wine, or whether or not you switch cable or internet providers based on price. Two companies surveyed by Consumer Reports, Amica Mutual and State Farm, said they do not use "price optimization." Allstate, Geico, Progressive, and USAA, would not discuss "price optimization" with Consumer Reports, indicating they may use the tactic to increase premiums. Fight "price optimization" by shopping for the best price for coverage. 5

6 Myth: Discounts for Anti-Theft Equipment Insurance companies say they offer discounts for installing anti-theft systems on cars, ranging from hood locks to tracking devices. The discounts ranged from $2 to $8 on average. Consumer Reports concluded, "You wouldn't clip a coupon for savings" so low. Myth: Loyalty Discounts It's common for customers to stay with the same insurance company for years. While some companies like State Farm provided discounts ranging from a few dollars to several hundred for loyal customers, other major insurers like Allstate and Geico charged more for loyal customers. Others varied by state and marital status. More often than not, insurers charge more for long-time, loyal customers, Consumer Reports learned, with "penalties" of more than $3,000 (Geico Casualty in New Jersey). Myth: Big Savings from Bundling Car and Home Insurance Consumer Reports learned that the savings for "bundling" car and home insurance was less than $100 on average. The savings vary from state to state. Florida drivers who "bundled" insuranced saved only $31 on average, while Michigan drivers averaged more than $240 in savings. Truth: Your Biggest Savings Come from Shopping at Least Three Companies Because policies and prices vary so greatly, and your situation will be unique, shop at least three different insurance companies before making a choice. Use our comparison tool on page 16 of this book. 6

7 How to Save Money on Car Insurance Janet Johnson, a mother of 9, recently re-entered the workforce with a job installing computers in Maryland. She told the Washington Post that although insurance companies report that premiums for lower-income, safe drivers have declined 14 percent in the past 5 years, it doesn t seem that way to her. She pays $ a month, or $1, a year to insure her 2001 Hyundai Sonata. We ve already told you about the #1 way to save money on car insurance: shop at least three different companies to get quotes. If you don t like the prices from the first three -- keep going! Different companies specialize in serving different customers, and the prices vary from state to state, so a company that could be the most affordable in Massachusetts might not be the best in New Hampshire. Consumer Reports survey covered every county and hundreds of millions of price quotes over two years, and could provide some helpful tips as well. Also, take the services of an individual agent into consideration. Some independent insurance offices could be able to get discounts that are superior to telephone or internet quotes. Again, this will vary depending on your circumstances, area, and the insurance company. Compare Insurance Before You Buy a Car Take the cost of insurance into consideration before you buy a car. Insurance premiums are based on a variety of factors related to the model, age, and type of car. You will find that some cars are much more affordable to insure than others. The Insurance Institute for Highway Safety recommends that you price policies for different models by calling the insurance company before you buy, not after. Kelly White, Resident Service Coordinator, Keene Housing Authority 7

8 Reduce Coverage, Increase Deductible One of the most obvious ways to reduce insurance premiums is to raise your deductible amount to $1,000. According to the Insurance Institute for Highway Safety, you could save 40 percent or more by this method. If you choose this option, you should have enough savings put aside to provide the necessary amount in case you have an accident or other claim. If your car is older and you do not have to have comprehensive or collision coverage, consider dropping this coverage. If your car is worth less than 10 times your annual premium, then consider this option. Special Discounts Consumer Reports survey discovered the hidden truth: some advertised discounts don t amount to much, like anti-theft device discounts or bundling auto and home insurance. Others are worthwhile, like discounts for taking defensive driving or other driver education courses. Good student discounts (generally a B average or higher) can also lower premiums, and do not neglect to ask for low-mileage discounts. If you drive less than 200 miles a week or 10,000 miles a year, you may even be eligible for some newer insurance programs Disa Nowack, AmeriCorps VISTA that charge per-mile premiums. New per-mile-driven policies from established companies, and companies specializing in only this type of insurance could offer significant savings. 8

9 Facts About Hard To Insure Situations Driving without car insurance is illegal in all states except New Hampshire, and if you have an auto loan, you know that you need insurance even in New Hampshire. Teen, Young Adult, or Newly-Licensed Drivers If you have a teen, young adult, or newly-licensed driver of any age in the family, you know that they cost more no matter what. However, there are some steps you can take to reduce premiums in addition to shopping for the best price. 1) Have one family car: The first tip may seem obvious, but insurance premiums will be lower for younger or high-risk drivers who share a car with another, lower-risk driver. 2) Drive safely: Also an obvious choice, but if your higher premiums come from several speeding tickets or more than one accident, avoiding these problems will result in lower premiums. Some companies are offering accident forgiveness immediately; others will keep premiums high for three to five years following an accident. Another general rule is that customers must have no moving violations within three years. 3) Get good grades: most insurers offer good student discounts for younger drivers who are attending school and receiving grades of B or above including young adults attending college. 4) Attend driver safety and road safety courses: some insurers give discounts for attendance at insurer or government-sponsored safety courses. In some areas, the classes are called driver retraining. 9

10 DUI, Speeding, or Multiple-Accident Drivers A DUI conviction, speeding tickets, or serious accidents, will result in a hard to insure situation. Different insurance companies specialize in insuring different hard to insure drivers, so calling around to find the company which is best for your situation is a must if you fall into this category. Other special circumstances can apply in these cases, including the SR-22 certificate requirement, and non-owner insurance. A request for an SR-22 or certificate of financial responsibility may be issued by a court in order for a driver to legally drive if they have been convicted of a DUI or other driving infraction. Although some companies advertise SR-22 Insurance, it really is just a certificate provided by the insurer to the Department of Motor Vehicles. An SR-22 certificate should cost no more than $25. Some states will require that all insurance be paid in full before a certificate is issued. If you do not own a car, but drive for work or school, you may also be able to get insurance to drive when you need to do so. This is called non-owner insurance. Lapses or Breaks in Coverage Some people have breaks in their insurance coverages, only to learn they will be charged extremely high premiums (in some cases, even more that their monthly take-home pay) when they try to start coverage again. Here are some recommendations from lessons learned by More Than Wheels clients: at least 6 months before you will need auto insurance, get non-owner insurance that allows you to drive a car you do not own. Or, save up for a down payment for your insurance. The cost will go down after you are continuously insured for six months. What if You Just Stop Driving? If you receive a notice that you are required to file an SR-22 in order to drive, or that you must provide other proof of insurance following a DUI conviction, accident, or other violation, you might be tempted to just stop driving for three years. In this case, try to find the most affordable insurance or basic coverage that you can and continue to drive as-needed, legally. Why? Because many states will require you to provide the extra insurance and coverage even after three years of not driving and your premiums could go even higher. 10

11 Car Insurance and Auto Financing If you finance your car purchase, the lender and you are co-owners of the vehicle. Because lenders want to protect their investment, they will have requirements for lower deductibles than are required by state law. If you own your car outright, you can choose a high deductible, for example, $1,000. Most car loans will require a deductible of $500 or less. What if you start off with a lower deductible and raise it later to lower your premiums? That won t work: you are required to inform your bank about any changes in insurance coverage. The lender is listed as a loss payee on the insurance information, and will be notified in case of any change in coverage. Important Steps to Take When Financing a Car Before you decide to buy and finance a car, speak with both the lender and the insurance company. Ask for as much information as you can ahead of time. Most insurance companies can quickly provide estimates of monthly insurance prices for different car models and deductible amounts. The lender will be able to give guidelines for the required deductible amounts and coverage. The first step in checking the insurance premiums is to make a list of the car makes, years, and models you are interested in buying. You can use an easy online tool such as the one offered by NerdWallet to make a quick estimate of your average premiums for different companies and your local area. Comprehensive and Collision Coverage You can forego comprehensive and collision coverage if you own your car outright, but it s unlikely you ll be able to do without it if you have a car loan. It s not hard to tell what collision coverage means -- it covers damage to your car from accidents. Comprehensive coverage refers to other types of damage, including fires, hail, or floods. Comprehensive coverage also covers theft or other types of damage, such as vandalism. 11

12 Coverage Exclusions Be sure to read the fine print in your policy. Comprehensive coverage often has exclusions: some common ones are GPS systems that you ve added to the car, or damage you have caused yourself. While most people understand this to mean that you can t deliberately damage your vehicle, then file an insurance claim, if you accidentally damage your vehicle with your own garage door, you might not be covered. Another common exception is livery conveyance, which means you are using your car to provide taxi services, such as being a Lyft or Uber driver, or as a pizza delivery driver. While you can get coverage to do these exact things, if you do it without knowing whether or not your insurance is covering you, you may end up having to pay off a car that you can t get repaired or replaced. New York Times Your Money reporter Ron Lieber advises, Drivers should ask insurers, point blank, if they are covered during the period when they are either looking for passengers or waiting to deliver pizza. One More Than Wheels client chose not to drive for one of the taxi services when she called her insurance company and learned that her premium would be more than she could reasonably expect to earn. 12

13 Car Insurance Companies Over the years we ve found that some insurance companies tend to offer better rates than others, so here s a list of our findings. Also, we recommend calling at least 3 companies to compare quotes. Maine Amica Progressive Insurance Geico ratequotes@geico.com Not generally good for those with poor driving records Ford Agency Massachusetts Amica Progressive Insurance Kaplansky Insurance Brookline Geico ratequotes@geico.com Not generally good for those with poor driving records Thomas Black Roslindale Boston South Boston Weeks & Devonish Dorchester American Consumer Insurance Agency, Inc Cambridge or The Commerce Insurance Company New Hampshire Amica Progressive Insurance Geico ratequotes@geico.com Not generally good for those with poor driving records Ford Agency Dover/Somersworth

14 New Hampshire, cont, Nationwide Agents Frazier Insurance Claremont Keene State Farm (Agents)Mike Estrada OR Mike Testa Lebanon Laconia Keene Concord Group FW Putnam Ins. Brattelboro, VT (serves New Hampshire) Clark Mortensen Keene Hinsdale The Insurance Source Keene Kapiloff Insurance Jen Stevens Keene Downy Northland Insurance Group Shari Tenofsky-Beteau Keene Vermont Amica Progressive Insurance TS Peck Ins Geico Not generally good for those with poor driving records Nationwide Agents Frazier Insurance WRJ Windsor Concord Group FW Putnam Ins The Richards Group Bellows Falls Brattleboro Wilmington

15 Other Resources Good News Garage (New England) Good News Garage repairs as many donated cars as possible in order to provide them to low-income families who need transportation to gain access to employment, shopping, school and medical facilities. Uber (Boston, MA & Manchester, NH) Uber riders and drivers find each other using a smart phone app for ride-sharing services. The average ride is roughly ten percent cheaper than a taxi in Manchester. Working Cars For Working Families Working Cars for Working Families is a coalition of organizations across the country dedicated to helping low-income families obtain, keep and use a vehicle to support their ability to find and retain employment. AAA AAA has many free transportation resources available on its website, including auto buying, AAA approved repair locations, driving resources and more Info Line 211 is a free information and referral service. Simply by dialing 2-1-1, a toll-free number throughout each state, callers can reach knowledgeable, multilingual staff and get information, referrals or seek help in a crisis operates 24 hours a day, every day of the year. Each individual state 211 program has a website of information, too. 15

16 PRINTED WORKSHEET Automobile Insurance Comparison Comparison shopping is important. This worksheet will help you compare the costs of different automobile insurance policies to help you find the best value. Name of Company Phone Number Policy Number Total Policy Premium BENEFITS: Liability Medical Payments Underinsured Motorist Uninsured Motorist Personal Injury Protection Collision Loss Collision Loss Deductible Comprehensive Comprehensive Deductible Towing and Labor Rental Reimbursement Other: Insurance Company A Insurance Company B Insurance Company C More Than Wheels Financial Fitness 16